Coming from Trinidad and Tobago in 2015, the GDF Suez Neptune delivers 3 billion cubic feet of liquefied natural gas to Everett, Mass. Photo by Steve Marsel, stevemarselstudio.com

As temperatures fall this winter, tankers loaded in Trinidad and Tobago are due to sail 2,200 miles to Boston Harbor with cargoes that will make Maine electric rates rise.

At a time when American natural gas is being exported around the world at record levels, New England has a dubious distinction. It’s the only part of the mainland United States that needs to import liquefied natural gas, or LNG, from other countries. That dependence could cost a typical Maine household an extra $22 a month on its electric bill in 2023, based on calculations that include premium prices for the fuel and future prices for wholesale power this winter.

The impact of LNG on Maine consumers is a case of adding insult to injury.

The cost of electricity supply for most homes and small businesses in southern and central Maine already has shot up this year, from around 6.5 cents a kilowatt-hour in 2021 to nearly 12 cents. Now the cost is poised to go even higher in 2023. A chief driver is the wholesale price of natural gas, which is burned for half of New England’s electricity generation.

Natural gas already is much more expensive in New England than elsewhere in the country, even nearby New York. That’s because some residents, politicians and environmental advocates have long opposed extending or expanding pipelines that could bring more, cheaper gas from producing regions, such as Pennsylvania. Reasons vary, but the key one is this: Methane is the chief component of gas and contributes to climate change. Environmental groups want to phase out the fuel, not expand its use for a problem mostly confined to a dozen or so winter days.

The death knell for new lines in New England sounded in 2016. That’s when the Tennessee Gas Pipeline, proposed to run across Massachusetts and southern New Hampshire and connect to the Marcellus shale fields, was abandoned after years of opposition.

Now there’s not enough pipeline gas in New England on the coldest days of the winter for power plants to reliably keep the lights on, and for millions of homes and businesses to stay warm and make things. The only way to have enough gas is to import it.

“That’s the most important issue affecting New England this winter, the world LNG market,” said Rich Silkman, chief executive of Competitive Energy Services, a Portland business that helps businesses negotiate power contracts.

Using figures available from S&P Capital IQ that show the monthly prices of wholesale electricity contracts on commodities markets this winter, Silkman compared New England and New York. Boiled down to cents per kilowatt-hour, January’s “forward” price in New England is 27 cents per kWh, compared with 10 cents in New York. Averaged out over 12 months, the calculations show that New England will be paying 6 cents per kWh more than its neighbors in 2023, with roughly 4 cents of that attributed to the high cost of imported LNG this winter.

Multiplying those 4 cents by 550 kilowatt-hours, the amount of electricity a typical Maine home uses, gets to $22. It’s the monthly LNG premium on this winter’s electric bills.

Viewed more broadly, New Englanders use roughly 120 billion kWh of electric power each year. That 4-cent LNG premium adds up to nearly $5 billion annually, Silkman calculated.

‘WORST OF BOTH WORLDS’

Mainers who drive to Boston this winter might spot one source of their higher electricity bills. Crossing the Tobin Memorial Bridge at the right time and glancing up the Mystic River, drivers may see a tanker ship the length of three football fields docked at the Everett LNG terminal, unloading 3 billion cubic feet of gas, enough to heat 30,000 homes for a year.

The terminal’s owner, Constellation LNG, has a contract to import 206 billion cubic feet of natural gas between 2019 and 2024, mostly from the Caribbean nation of Trinidad and Tobago. The terminal can store enough gas to power more than 4,000 megawatts of generation for several days, enough to light 4 million homes. Nine tankers called last year at Everett and a much smaller, offshore terminal called Northeast Gateway. Additional cargoes came into Saint John LNG in New Brunswick, Canada, some of which was shipped to New England via a cross-border pipeline.

Natural gas can be moved long distances by chilling it to minus 260 degrees to liquefy and compress it, then pumping it into double-hulled, insulated carrier ships. The ships sail to terminals that can store and vaporize it, turning it back into a gas to put into pipelines. This is an expensive process in the best of times. But this winter, LNG prices are skyrocketing to levels four or five times higher than the benchmark prices for pipeline natural gas in the United States.

Russia’s war in Ukraine and its retaliatory gas supply cuts to Europe have scrambled global energy markets and increased demand for LNG shipments ahead of cold weather. As a notable example of the chaos, Chinese companies with contracts to buy U.S. gas are reselling some of it at a profit to Europe, the Wall Street Journal has reported.

Once a useful tool in the region’s battle of energy supply and demand, LNG has become a battleground.

“LNG was supposed to relieve some of the (pipeline) congestion in New England,” said William Harwood, Maine’s public advocate. “And it worked great for several years to soften the impact in winter. But now, because of international developments, it’s making things worse.”

LNG imports had helped temper gas and electric prices in New England. Seven years ago, when petroleum prices were collapsing, cheap LNG was seen as a tool to stall the need to build unpopular, multibillion-dollar pipelines. In 2023, constrained pipelines and high-priced LNG have flipped the script.

“Now we have the worst of both worlds,” Harwood said.

THE SWING FUEL

Why import natural gas to New England when the United States is exporting it at record levels? Why not divert some of the American gas now being shipped overseas to our region, from the Gulf Coast to Massachusetts?

The reason stems from a century-old, federal maritime law known as the Jones Act. The law requires that all goods going by water between American ports be carried in ships built, owned and registered in the U.S. The act was passed to protect domestic shipping interests, but today no U.S.-flagged ships are capable of transporting LNG.

Last July, Gov. Janet Mills and the other five New England governors sent a letter to U.S. Energy Secretary Jennifer Granholm, asking her to consider possible requests to waive the Jones Act this winter. They followed up with a virtual meeting last month. Nothing has happened so far.

The Jones Act can only be waived on a case-by-case basis by the Department of Homeland Security. And it probably wouldn’t matter, in Silkman’s view, because energy companies that can earn top dollar exporting overseas have no incentive to sell for less in New England. Transportation makes up only a small fraction of the total cost of the global commodity, he added.

It’s hard to know how much LNG the region might need this winter, but any infusion could have an outsized role on prices. That’s because ISO-New England, the region’s electric grid operator, secures enough power to meet changing demand every minute of the day through a process known as a uniform clearing price auction. Put simply, the price paid to all power plants is set by the one that satisfies the next increment of energy demand at the lowest cost. When pipelines are tapped out in frigid weather, LNG becomes the “swing fuel” for gas-fired plants to meet that last increment, according to Dan Dolan, president of the New England Power Generators Association.

“So if you have a high-priced commodity in the market,” Dolan said, “if it’s needed for reliability, we see prices rise overall.”

STUCK, FOR NOW

Drivers crossing the Tobin bridge can spot another piece of the policy puzzle necessary for keeping the lights on in New England this winter. The tall smokestacks belong to the Mystic Generating Station, a large power plant connected by pipeline to the adjacent Everett LNG terminal. Both are owned by Exelon Corp., the parent company of Constellation Energy.

The 1,400-megawatt-capacity power plant and terminal have a synergistic relationship. The plant provides an outlet for some of the gas being unloaded at the terminal. Mystic also plays a role in assuring reliable electric service in the Boston area.

ISO-New England has authorized hundreds of millions of dollars in customer charges in recent years to keep Mystic online, until transmission upgrades are completed. But after a cost-of-service dispute with ISO-New England didn’t go its way, Exelon announced in 2020 that it would close Mystic in 2024.

Left up in the air is the economic viability and fate of Everett LNG. ISO-New England says the terminal will be needed for some period past 2024.

Following a regional energy roundtable last month, Stephen George, ISO’s director of operational performance, summed up the dilemma this way: “In the long term, we need to get out of the business of tracking LNG ships across the ocean. It’s not sustainable, it’s not reliable, it’s probably not very efficient, but that’s what we do today.”

CLEAN ALTERNATIVES

New England could kick its winter dependence on LNG by replacing the shortfall with renewable energy – such as solar, wind and hydro – and backing it up with enough storage to ride out cloudy, calm periods. This clean-energy evolution is well underway. But despite aspirations, getting enough renewables in place to offset natural gas will take time, and there’s debate over how to speed the transition.

ISO-New England says it’s taking steps to support the shift to a clean-energy economy. But the grid operator warns that, in the short term, the region needs to “secure and stabilize the imported LNG supply chain” to keep Everett operating after 2024.

Germany offers a cautionary tale. Political leaders there phased out nuclear power before enough clean energy could come online. Now polluting, coal-fired plants are needed to keep homes warm this winter, after Russia’s unexpected gas cut-off. During last January’s cold snap, New England needed to run dirtier, oil-fired plants for reliability, including Wyman Station in Yarmouth.

“Simply put, when reliability suffers, the clean energy transition suffers,” the grid operator said in a recent statement.

But a coalition of environmental groups say continued over-reliance on gas is the biggest threat to the transition. They compiled a recent report with strategies to “get off the gas crisis carousel,” according to a recent blog from the Natural Resources Defense Council, one of the participants.

Adding more solar, wind and storage is the key, said Bruce Ho, the council’s regional deputy director for energy. But in an interview, Ho acknowledged that these solutions can’t fill the gas gap quickly or completely. Solar farms aren’t useful on a cold winter night. Construction of offshore wind turbines, the region’s biggest potential game changer, is just starting. Battery storage is ramping up, but the long-duration technology needed to get through an extended cold snap is still under development.

Short term, New England could trim its gas dependence by doing more with demand response, the practice of reducing electric use during peak periods. Some big businesses are paid to turn down motors, for example, when demand is high. That’s mostly in summer, but the report suggests more winter demand response could reduce the need for LNG.

Home customers also could be compensated for turning down thermostats and postponing heavy power use in the winter, the report suggests. Expanding energy efficiency programs that include switching from oil and gas furnaces to high-performance heat pumps also could make a difference, the report says. That strategy is already heavily promoted in Maine.

“Unfortunately,” Ho said, “we are in a situation where the grid is heavily reliant on gas and there’s no easy, quick fix. The point we’re trying to emphasize is, part of getting out of this is investing in clean energy solutions, so that we’re not dependent on world events.”